US banking regulators working on climate risk management guidance

U.S. banking regulators are working on new climate risk management guidance. A top official said that this is for large lenders. Also, it is another sign of efforts to incorporate the risks posed by rising temperatures into financial rules. Michael Hsu, the acting Comptroller of the Currency said that his agency was working on the guidance in collaboration with other banking regulators. This is to help lenders navigate the physical and transition risks climate change, that is posing to the financial system.

Risks like rising sea levels, carbon-neutral technologies are aiming at slowing global warming. This could destroy trillions of dollars of assets. Hence the climate change could upend the financial system. In a speech at Washington, Hsu said that the climate change poses an existential risk to society and also to banks. To safeguard trust, banks and regulators must begin to take action immediately. The Federal Reserve has asked lenders to provide information about the measures they are taking to mitigate climate change-related risks. Since then, Fed officials have said that they would consider stress-testing banks’ balance sheets against climate scenarios. Hsu’s comments are the first to suggest. Anyway, that the regulators are working on more expansive guidance. A far broader set of the country’s lenders and the companies connected with them are affected. While guidance does not carry the same legal weight as a formal rule. According to the lawyers, it is often as effective and can be fast implemented.